Piramal Enterprises Ltd

FY2011 KEY HIGHLIGHTS:

• Sale of Healthcare Solutions business to Abbott for $ 3.8 billion

• Sale of shareholding in Piramal Diagnostics Services Private Limited to SuperReligare Labs for Rs. 6.0 billion

• Buyback of 20% of equity share capital of PHL at Rs. 600 per share, total outlayRs. 25.1 billion

• Proposed de-merger of PLSL’s NCE research unit into PHL

• Entry into Financial Services business by setting up NBFC and acquisition ofIndiareit Fund Advisors & Indiareit Investment Management

Divestment of Healthcare Solutions business

On 21^st May 2010, Piramal Healthcare Limited (PHL) entered into a definitiveagreement with Abbott, USA to sell its Healthcare Solutions (Domestic formulations)business for total cash consideration of $3.8 billion. The domestic formulation businessused to manufacture, market and sell branded pharmaceutical products in finished formmainly in Indian market. As per the terms & conditions of the deal, PHL hastransferred its assets including manufacturing facility at Baddi, Himachal Pradesh, rightsto approximately 350 brands & trademarks and more than 5,000 employees from thedomestic formulations business. The business had sales of Rs. 19.7 billion in FY2010.

This was a landmark deal in the history of Indian pharmaceutical industry; with premiumvaluation of ~9x FY2010 sales.

The transaction was completed on 7th September 2010 and PHL received Rs. 102.7 billion(equivalent to $ 2.2 billion) as initial consideration. The remaining consideration willbe paid in four installments of $ 400 million in each of four subsequent anniversaries ofthe closing, commencing in September 2011.

Divestment of Diagnostic services business

During the year PHL sold its shareholding in its subsidiary Piramal Diagnostic ServicesPrivate Limited (PDSL) to Super Religare Laboratories (SRL) for the total consideration ofRs. 6.0 billion. As per the deal, PHL has received Rs. 3.0 billion in cash as an upfrontpayment on closure of transaction in the month of August 2010, and Rs. 1.4 billion inJanuary 2011. The balance amount is held in form of debentures of SRL to be redeemed overa period of not more than 3 years.

This deal valued Diagnostic services business at 3x FY2010 Sales and ~16x FY2010EBITDA.

BUYBACK OF SHARES

Through the two landmark deals done in FY2011, PHL has unlocked tremendous value forshareholders. Having created this value for the Company, a part of it was distributed tothe shareholders by the way of buyback of shares. During the year, PHL bought back 41.8million shares which represented 20% of the equity share capital at a price of Rs. 600 pershare. The buyback price represented a premium of 19% over the average share price for thelast three months at the time of announcement of buyback (22^nd October 2010).Rs. 25.1 billion was given back to shareholders in March 2011 as a result of thisexercise.

COMMITMENT TO PHARMACEUTICAL INDUSTRY

After the divestments of Healthcare Solutions business and shareholding in oursubsidiary Piramal Diagnostic Services Private Limited, the business profile of PHL hascompletely changed. PHL now has three main businesses which it would continue to investand grow:

1. Pharma Solutions:

This is a global business that partners with MNC pharmaceutical companies to servicetheir manufacturing and development needs. PHL has six facilities in India, two in UK andone in Canada. This division had sales of Rs. 10.2 billion in FY11.

2. Critical Care:

This is a global business that caters to drug requirement of hospitals worldwide. PHLhas presence in 100+ countries globally either through distributors or through own office.PHL has one facility in India and one in US. This division had sales of Rs. 3.9 billion inFY11.

3. Consumer Products Division/OTC:

This is a domestic business that caters to Indian consumers through sales of OTCproducts. We have a strong product portfolio consisting of Lacto Calamine – skin carerange, Saridon – analgesic, Polycrol – digestive, Supractiv – nutritionalsupplement, i-pill – emergency contraceptive pill and Itchmosol – anti itchingcream.

Proposed demerger of PLSL’s NCE research unit into PHL

The Board of PHL has approved the scheme of De-merger of the New Chemical Entity (NCE)Research Unit of Piramal Life Sciences Limited (PLSL) into Piramal Healthcare Limited.Under the proposed De-merger scheme, each shareholder of PLSL will be entitled to onefully paid up equity share of Rs. 2 each of PHL for every four equity shares of Rs. 10each held in PLSL. All assets and liabilities of the NCE division will be transferred toPHL at book value.

Since April 2007, when PLSL was de-merged from PHL as an independent discovery researchcompany, it has made significant progress. The pipeline of R&D programs has increasedfrom nine to twenty four with nine additional programs moving into Phase I/II clinicaltrials and two additional program moving into

Phase II clinical trials. Subsequent to the significant progress that PLSL has made,the risk profile of NCE R&D activity has reduced considerably.

Through this de-merger, PHL will have an access to the innovation platform of PLSLthrough which it can build its innovative discovery and commercialization business. PHLcan also better utilize its manufacturing infrastructure and leverage its marketingexperience with products from PLSL.

The Demerger Scheme is subject to the consent of requisite majority of shareholders andcreditors of the Company and of PLSL. The Demerger Scheme is also subject to thesanction of the High Court of Judicature at Bombay and all other regulatory approvals asmay be necessary for the implementation of the Demerger Scheme.

Acquisition of assets of Biosyntech

During the year, PHL acquired assets of Biosyntech for a consideration of C$ 4.7million. Biosyntech is a medical devices Company specializing in the development,manufacturing and commercialization of advanced biotherapeutic thermogels for regenerativemedicines (tissue repair) and therapeutic delivery. Company’s lead late stage productBST-CarGel has undergone a pivotal study for cartilage repair recently and the finalclinical study report is awaited.

ENTRY INTO FINANCIAL SERVICES SECTOR

We have been evaluating various sectors to invest some of these funds in a way thatoptimizes our strengths and results in long term value creation for our shareholders. Withthis in mind, the Board of Directors has approved a plan for PHL to enter into theFinancial Services sector through a fully owned subsidiary company. India has had strongGDP growth in past decade and is likely to continue with 8-9% GDP growth rate for the nextdecade. Given sound economic fundamentals, rising disposable income, financial sectorliberalization and growth of consumer oriented, credit oriented culture; the financialservices sector is poised for strong growth in India. To participate in this growth story,PHL has decided to foray in financial services sector.

To begin with PHL will set up an NBFC for lending to Infrastructure sector and to othersectors and will also get into Fund Management for Real Estate & Infrastructuresector.

Acquisition of Indiareit Fund Advisors & Indiareit Investment Management:

Towards building a strong financial services business, PHL is in the process ofacquiring Indiareit Fund Advisors Pvt. Ltd. and Indiareit Investment Management Companyfor the total consideration of Rs. 2.3 billion. Indiareit Fund Advisors Pvt. Ltd. areadvisors to the Indiareit Fund which is a domestic real estate Private Equity fund focusedon the Indian markets. Indiareit Investment Management Company is manager to offshore RealEstate Private Equity funds investing in India through the FDI route. The total fund sizeunder management for these funds is Rs. 38 billion.

Together, the Indiareit Fund Advisors & Investment Management have a demonstratedtrack record of raising and deploying effectively large sums of capital in the real estatesector in India and are best positioned to benefit from the emerging Indian real estatemarket.

FINANCIALS - FY2011: (CONSOLIDATED) AT A GLANCE

The Management Discussion & Analysis presented below and in the subsequent pages isprepared for continuing businesses (i.e. excluding financials of Healthcare Solutionbusiness and Piramal Diagnostic Services Pvt. Ltd.).

Pharma Solutions:

• Enhanced capability to provide integrated clinical development services throughacquisition of Oxygen Bio Research

• Capacity utilization significantly improved for Digwal and Pithampur sites

• Ahmedabad site successfully audited by 6 out of top-20 pharma companies;supplies started for 3 new clients during the year

• Ennore site successfully audited by 4 out of top-20 pharma companies; suppliesstarted for 12 new clients during the year

• Acquisition of anesthetic products business of Bharat Serums and VaccinesLimited

• Increased market share for Sevoflurane in U.S. market

• Registrations received in 4 countries in EU, thereby marking an entry in EUmarket

• Production volume at Bethlehem site increased significantly for Sevoflurane

• Moved from no. 40^th in 2008 to among top-10 in OTC market inIndia

• Launched a new antibacterial soap – TRI-ACTIV

Net Sales analysis (Consolidated):

PHL’s Pharma Solutions business grew by 8.6% to Rs. 10.2 billion as compared toRs. 9.4 billion for FY2010. Revenues from Critical Care grew by 18.3% to Rs. 3.9 billionagainst Rs. 3.3 billion in FY2010. Sales from OTC & Ophthalmology segment was Rs. 2.0billion as compared to Rs. 1.8 billion in FY2010 registering growth of 10.6% for the year.

The break-up of aggregate Total Operating Income is as under:

Market commentary:

The global CMO market was estimated to be worth c. $ 13 billion in 2002 and has grownto estimated $ 22 billion in 2009. Growth in the CMO industry has been impacted in last 2years due to global financial crisis and resultant reduction in inventory level at manylarge multinational pharmaceutical companies. However the de-stocking phenomenon is comingto an end and the industry is on recovery phase. Global pharmaceutical companies facedwith patent expiry of large blockbuster products and fewer new products approval are undertremendous pressure to cut costs. Indian companies with their high quality, low costproduction capabilities are well poised to benefit from this trend.

Piramal Healthcare's performance:

The revenues from Pharma Solutions business grew by 8.6% to Rs. 10.2 billion in FY2011as compared to Rs. 9.4 billion in FY2010. The revenues from Indian assets grew by 21.9% toRs. 5.2 billion against Rs. 4.3 billion in FY2010.

Acquisition of Oxygen Bio Research:

During the year PHL acquired Oxygen Bio Research ("Oxygen") based inAhmedabad, India. Oxygen is a discovery services company that provides integrateddiscovery services – synthetic chemistry, medicinal chemistry, computationalchemistry and in-vitro Biology. Oxygen has developed specialist capabilities in medicinalchemistry and have a track record with four of the top 20 pharmaceutical companies andseveral biotechnology companies working in early stage discovery. The acquisition ofOxygen marks PHL’s entry into the discovery services business and will enable PHL topartner with its client companies at the early stage of drug life cycle.

Increase in capacity utilization:

The capacity utilization at Digwal site is expected to reach at peak level in FY2012and PHL is currently evaluating various options to increase capacity. Similarly capacityutilization at Pithampur site has also increased significantly during the year.

Increased non-Pfizer revenues at Morpeth:

On the back of robust clinical trial packaging and formulation development business,non-Pfizer revenue as a % of site sales has increased from 12% of sales to 26% of salesduring the year.

Significant progress at Early Phase Assets:

Ahmedabad site was successfully audited by six out of top 20 companies and has startedsupplies to three new clients. Ennore site was successfully audited by four out of top 20companies and has started supplies to twelve new clients during the year.

Piramal Critical Care

Revenues from Critical Care business grew by 18.3% to Rs. 3.9 billion as compared toRs. 3.3 billion in FY2010, mainly due to increase in Sevoflurane sales.

Acquisition of Anesthetic business of Bharat Serums And Vaccines Limited:

During the year PHL acquired Anesthetic products business of Bharat Serums And VaccinesLimited (BSV) to expand its anesthetic portfolio to include injectables. The acquisitionprovides PHL an immediate entry into the Propofol market, the largest selling injectableanesthetic globally.

Increased market share in US for Sevoflurane:

Sevoflurane market share for PHL in US has increased from 14% as on March 2010 to 20%in March 2011 in volume terms.

Entry in European Union:

During the year, PHL has received registrations in four countries in European Union.This will help PHL expand Sevoflurane sales into Europe with registrations applied for intwenty six EU countries having combined market of $ 300 million.

Capacity Expansion:

Last year we have expanded production volume for Sevoflurane by 70% at Bethlehem site.Capacity for producing Isoflurane at Digwal was almost doubled in FY2011.

OTC & Ophthalmology

Sales from OTC & Ophthalmology business grew by 10.6% to Rs. 2.0 billion in FY2011as compared to Rs. 1.8 billion in FY2010. During the year, PHL has introduced a new rangeof anti bacterial soap – TRI-ACTIV in the OTC space.

Moved to among top-10 players:

PHL has a strong brand portfolio consisting of Saridon, Lacto Calamine, I-pill,Polycrol, Supractiv, TriActiv & Itchmosol. The business has now moved from ranked 40^thin the year 2008 to among top 10 OTC companies in India in the year 2011.

Allergan India Limited (‘AIL’):

AIL is a 51:49 Joint Venture between Allergan Inc., USA and Piramal Healthcare Limited.Total revenues of AIL grew by 25.4% to Rs. 1.4 billion (FY2010 Net Sales: 1.1 billion).The Operating profit for FY2011 was up by 7.9% to Rs. 384.5 million as compared to Rs.356.3 million in FY2010. Profit after tax for FY2011 was up by 9.6% to Rs. 241.8 millionas compared to Rs. 220.6 million for FY2010.

Sale of stake in JV with ARKRAY:

In the month of September 2010, Company sold its entire stake of 49% in its JointVenture Arkray Piramal Medical Private Limited held through its wholly owned subsidiaryPHL Fininvest Private Limited. The Company recognised a profit (net of expenses) of Rs.177.4 million on account of the sale of its stake in the joint venture.

Human Resources

The Company continues to focus on core values of Knowledge, Action and Care foremployee. The relationship with all employees in the Company continues to be core. Inrecent years we have started numerous initiatives, which will enhance our ability toattract & retain high calibre employees and enable us to evaluate our potential &existing talent pool:

Bandhan:

Our journey of Bandhan (Employee Engagement) is in its third year. Our pursuit to usherin a culture of engagement has received a great impetus with our employees’phenomenal participation in this year’s Bandhan survey.

Learning & Development:

Piramal Healthcare’s value of "Care" includes its continuing commitmentto the capability building of its employees for sustained superior performance and hasresulted in a series of structured management development programmes. The PACE program, adevelopment initiative for mentoring junior managers was conducted with broad basedparticipation across geographies, across departments.

VConnect:

During the year, we have established a fully integrated Employee’s InformationPortal – "VConnect", which acts as a multipurpose utility application foremployees of Piramal Healthcare across all locations in India.

Career Opportunity Program (C.O.P):

The Career Opportunity Program was conceptualized to provide a platform to giveour employees opportunities to benefit cross-functional, inter & intra-location andinter-intra-business movements across PHL globally. Since the launch of C.O.P in July2007, more than 100 employees have already moved across Businesses & functions acrossvarious geographies. This year more than 20 opportunities were advertised over the portalwhich received overwhelming responses from across the organization.

During the period under review, total manpower increased by 364 people to 3,238 from2,874 in FY2010. The numbers presented below relate to employees of continuingbusinesses (i.e. excluding Healthcare Solutions business).

Client concentration risk and Revenue volatility in Pharma Solutions business:

Since our business model is based on contracts with customers any set back for theclient company product will adversely affect our revenues and hence profits as well.

Foreign Exchange Risk:

We have significant revenues in foreign currency, particularly in U.S. Dollars. We alsohave operations outside India in countries like U.K., U.S. and Canada. Through thesecompanies, we are exposed to risk arising out of foreign exchange rate changes.

Interest rate risk:

PHL has derived a significant portion of its profit from investment income which islinked to prevailing interest rates in India. If interest rates decrease significantly,the investment income of PHL will be much lower.

Product risk:

Any product failure would create significant liability and adversely affect ourcompany.

Disclaimer:

Certain statements included above may be forward looking and would involve a number ofrisks, uncertainties and other factors that could cause actual results to differmaterially from those suggested by the forward-looking statements.

Income Statement (Consolidated)

Total Operating Income

Total Operating Income grew by 26.6% to Rs. 20.0 billion as compared to Rs. 15.9billion in FY2010. The total operating income for FY2011 includes an investment income ofRs. 3.3 billion arising out of investment of proceeds from Abbott and SRL deals. Adetailed analysis of Total Operating income is given earlier in the report.

Earnings Before Interest, Depreciation and Tax (EBITDA)

EBITDA for the year grew by 172.3% to Rs. 3.8 billion against Rs. 1.4 billion inFY2010. The margins as a percentage of total income were higher at 18.9% as compared to8.8% for FY2010. EBITDA for FY2011 was higher mainly due to increased investment income(Rs. 3.3 billion) in FY2011.

Interest Expense

Interest expense reduced by 44.6% from Rs. 1.6 billion in FY2010 to Rs. 886.6 millionin FY2011, due to repayment of loan funds during the year.

Depreciation

Depreciation for FY2011 was up by 16.2% at Rs. 958.6 million as compared to Rs. 824.9million in FY2010 because of increase in fixed assets at various sites during the year.

Exceptional Items

Exceptional Items during the year includes gain of Rs. 162.2 billion on divestment ofHealthcare Solution and sale of subsidiary -PDSL.

Taxation

Tax for FY2011 was higher due to capital gains tax on account of divestment ofHealthcare Solutions business and sale of subsidiary - PDSL.

Profit After Minority Interest and Earning Per Share (EPS)

Profit After Minority Interest for the year was Rs. 127.4 billion and EPS for the yearwas at Rs. 567.1.

Balance Sheet (Consolidated)

Note: The numbers for some of Balance Sheet items for FY2010 on a like-to-like basisare not available, hence the table above shows current year numbers only.

Loan Funds

Total Debt as on 31 March 2011 was Rs. 7.6 billion, compared to Rs. 12.9 billion as on31 March 2010. Debt/ Equity ratio was 0.06 as on 31 March 2011, compared to 0.77 in 31March 2010. During the year, loan funds decreased by Rs. 5.4 billion as they were repaidfrom proceedings from sale of Healthcare Solutions and sale of our subsidiary - PDSL.

Fixed Assets

During the year, PHL’s gross fixed assets increased by Rs. 2.7 billion. The majoritems of capital expenditure are as under:

Net Working Capital (Consolidated)

Notes: All the above ratios have been calculated on the basis of Gross Sales (i.e. netsales + excise duty) and it also includes other operating income, but it excludes cashreceived and receivable from Abbott deal and cash balance attributable to buyback ofshares